AN astounding 10,378 people – that’s the number of young Malaysians who were declared bankrupt between 2018 and September this year.
Over 20% of the 47,929 persons declared bankrupt during the period were under the age of 34; 10,138 were aged between 25 and 34; while those under 25 make up 240 bankruptcy cases, according to statistics from the Insolvency Department website.
Youths, said Universiti Malaya Faculty of Business and Economics Assoc Prof Dr Aida Idris, need to manage their finances efficiently to avoid bankruptcy.
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“Many youths today are chasing an extravagant lifestyle. Avoiding wastage and unnecessary expenditure is important,” she told StarEdu.
Aida warned that pursuing the lavish lifestyles often portrayed on social media is not sustainable for most people.
“Regardless of whether you can afford it, leading a hedonistic lifestyle is destructive,” she warned.
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The Insolvency Act 1967 was amended in 2020, to raise the bankruptcy threshold from RM50,000 to RM100,000. This was the second time the bankruptcy threshold had been increased within a span of a few years, after it was raised from RM30,000 to RM50,000 in 2017.
According to the Insolvency Department, a person can only be declared bankrupt by a court order. A creditor may file for bankruptcy action against a debtor if the debt amounts to RM100,000.
It’s vital for youths to surround themselves with positive people who can empower them to make good financial decisions and to avoid bankruptcy, said Sunway College assistant director (Pre-U Studies) Lee Thye Cheong.
“The company you keep has a huge influence on your attitude towards spending, saving and investing. As such, try to keep friends who are mindful of these aspects of personal financial management,” he said.
Lee stressed that being financially free takes dedication and discipline.
“Always focus on how much to save before planning your spending. Be mindful of making purchases or investments based purely on emotions,” he advised.
Stressing that it is not the end of the road for those declared bankrupts, the Credit Counselling and Debt Management Agency (AKPK) said there are many ways for youths to manage their way out of the problem.
“No matter how bad your financial situation is, it is never too late to take the right course of action and start over,” the department said in an email response.
Some avenues include seeking emotional support from loved ones, creating multiple incomes to settle the debt early and monitoring your credit report.
Financial literacy, said the AKPK, is the key to combating bankruptcy among youths.
“There is no specific manual or textbook on financial literacy but it is important to learn basic essential financial skills and knowledge from a young age to manage debt and plan for their future.
“Financial literacy helps us understand the value of money, know the importance of budgeting and saving, and avoid unnecessary expenditure, so that we are better able to handle our finances,” the department said, adding that being financially literate will prevent youths from getting into any financial trouble in the first place.
A proper education can help empower youths with good financial practices and behaviours, thus preventing them from becoming bankrupts, the department said. — By CHESTER CHIN and NURFATIHAH IRDINA ADLAN